Suppose that the price of labor,the only variable input needed to produce cotton,increases from $100 day to $120 day.The effect on costs will be
A) a parallel shift in the total cost curve.
B) a parallel shift in the fixed cost curve.
C) a parallel shift in the marginal cost curve.
D) a shift in total cost by different amounts for different quantities.

Question

Quizplus · Accepted Answer

The increase in the price of labor will affect the total cost of production for each level of output, resulting in a shift in the total cost curve. However, the magnitude of the shift will vary at different levels of output, resulting in a different amount of increase in total cost. Thus, it will not be a parallel shift. Instead, it will result in a shift in total cost by different amounts for different quantities, making option D the correct answer. The fixed cost curve will not shift as it is not affected by changes in variable inputs like labor costs. The marginal cost curve will also shift, but this change will reflect the change in variable costs and not the fixed costs, resulting in a shift that differs from the fixed cost curve. Hence, option A and C are also incorrect choices.

Suppose That the Price of Labor,the Only Variable Input Needed